Game, but not set and match to administrators

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At the end of hard fought High Court proceedings, the administrators of night club operator, Luminar Leisure, agreed to hand back properties owned by one of its landlords, X-Leisure.

The further upside for X-Leisure is that, with the benefit of only one week's occupation, the administrators must pay in full the rents due for the current quarter. On the other hand, X-Leisure can only claim as an unsecured creditor the rents payable for the quarter during which Luminar went into administration.

The decision has implications for landlords now grappling with the Game administration.

It was established in a previous case (Goldacre) that, where administrators are using leased property, they must pay rent as a priority "administration expense".

What was left in doubt by the Goldacre case was whether companies in administration would also have to pay as an administration expense rent for the remainder of the quarter in which the administration started.

The High Court today said not. These were the facts:

  • Luminar failed to pay rents due on 29 September.
  • Administrators were appointed on 28 October.
  • Rent demands for the period to 24 December were rejected.
  • The December and March quarters' rents were paid by the administrators without dispute.

Implications

Appointments of administrators immediately after a quarter day are likely to increase, enabling companies in administration to benefit from almost 3 months rent free occupation. Game is a case in point, its administrators having been appointed earlier this week, one day after the March quarter day.

Landlords will be looking to manage the legal position. Where tenants approach landlords for rent concessions, either to move to monthly rents or otherwise change payment arrangements, the opportunity should be taken to minimise landlords' risk.

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